Mobile Economics - The power of FREE!
Chris Anderson, the author of "Free: The Future of a Radical Price" wrote:
“Give a product away, and it can go viral. Charge a single cent for it and you’re in an entirely different business. . . . The truth is that zero is one market and any other price is another.”
Dan Ariely, the author of “Predictably Irrational.” wrote:
A group of subjects a choice between two kinds of chocolate—Hershey’s Kisses, for one cent, and Lindt truffles, for fifteen cents. Three-quarters of the subjects chose the truffles. Then he redid the experiment, reducing the price of both chocolates by one cent. The Kisses were now free. What happened? The order of preference was reversed. Sixty-nine per cent of the subjects chose the Kisses. The price difference between the two chocolates was exactly the same, but that magic word “free” has the power to create a consumer stampede.
And here is my personal experience:
During the first five days of my week-long experiment, I listed my simple iPhone app at $0.99 on the iOS app store and received zero downloads. On day six, I stopped charging for my app. And voila, the number of downloads shot up, just shy of 60! That is zero to sixty under 24!
My app competes with at least a dozen other apps in its category, that range all over the spectrum in terms of price. And so as economic theory suggests, in a highly competitive market with close substitutes, price tends to be pretty elastic. So the results in and of itself is along the expected lines.
Which leads us to the question, how can one compete is such a market?
Here are some choices:
1. Differentiate the product
2. Increase stickiness
Got more ideas?
I'll save my ideas on what I did for differentiating and increasing stickiness for another post! :-)
Chris Anderson, the author of "Free: The Future of a Radical Price" wrote:
“Give a product away, and it can go viral. Charge a single cent for it and you’re in an entirely different business. . . . The truth is that zero is one market and any other price is another.”
Dan Ariely, the author of “Predictably Irrational.” wrote:
A group of subjects a choice between two kinds of chocolate—Hershey’s Kisses, for one cent, and Lindt truffles, for fifteen cents. Three-quarters of the subjects chose the truffles. Then he redid the experiment, reducing the price of both chocolates by one cent. The Kisses were now free. What happened? The order of preference was reversed. Sixty-nine per cent of the subjects chose the Kisses. The price difference between the two chocolates was exactly the same, but that magic word “free” has the power to create a consumer stampede.
And here is my personal experience:
My app competes with at least a dozen other apps in its category, that range all over the spectrum in terms of price. And so as economic theory suggests, in a highly competitive market with close substitutes, price tends to be pretty elastic. So the results in and of itself is along the expected lines.
Which leads us to the question, how can one compete is such a market?
Here are some choices:
1. Differentiate the product
2. Increase stickiness
Got more ideas?
I'll save my ideas on what I did for differentiating and increasing stickiness for another post! :-)
No comments:
Post a Comment